1 of 5

G.R. No. L-27361 May 29, 1981

PARKE, DAVIS & COMPANY, plaintiff-appellant,
vs.
DOCTORS' PHARMACEUTICALS, INC. and V-LAB
DRUGHOUSE CORPORATION, defendants-appellees.

ABAD SANTOS, J .:1wph1.t
This is an appeal from the order of the Court of First Instance of
Rizal dated August 22, 1966, in Civil Case No. C-712, dismissing,
on the ground of lack of cause of action, the complaint for
damages for infringement of patent and unfair competition, with
preliminary injunction, filed by the herein appellant against the
herein appellees.
On May 5, 1966, Parke, Davis & Company filed with the Court of
First Instance of Rizal, Caloocan City Branch, the said Complaint
with Preliminary Injunction against Doctors' Pharmaceuticals, Inc.,
otherwise referred to as defendant No. 1 and V-LAB Drughouse
Corporation, otherwise referred to as defendant No. 2, alleging,
among others, that plaintiff is a foreign corporation organized and
existing under the laws of the State of Michigan, U.S.A., with
principal office situated in Detroit Michigan, U.S.A.; that the laws of
the United States of America allow corporate or juristic citizens of
the Philippines to file in said country, actions for infringement of
patents and for unfair competition: that defendants 1 and 2 are
corporations organized and existing under the laws of the
Philippines with offices respectivrely located at 354-B San Diego
Street, Grace Park, Caloocan City and 126 Gen. Evangelista
Street, Caloocan City; that on March 21, 1957, Letters Patent No.
279 was legally issued to plaintiff' by the Patent Office of the
Republic of the Philippines for an invention entitled
"Therapeutically Valuable Esters and Method for Obtaining the
same"; that since that date, plaintiff has been and still is, the owner
of said Letters Patent No. 279 which is still in force in the
Philippines; that defendant No. 1 has knowingly infringed and is
still knowingly infringing Claim 4 of said Letters Patent No. 279 of
plaintiff by selling, causing to be sold, using or causing to be used,
"Chloramphenicol Palmitate", the substance covered by said Claim
4 of said plaintiff's Letters Patent No. 279, under the name
"Venimicetin Suspension", willfully and without the consent or
authorization of plaintiff; that defendant No. 2 has likewise,
knowingly infringed and is still knowingly investigation Claim 4 of
said letters Patent No. 279 by acting as distributor of defendant No.
1 of the latter's medicine called "Venimicetin Suspension" which
contains "Chloramphenicol Palmitate": that plaintiff, through its
wholly-owned local subsidiary, Parke, Davis & Company, Inc. a
domestic corporation with main office at Mandaluyong, Rizal, has
at great expense, established a market and a continuing demand
for "Chloramphenicol Palmitate" in the Philippines and has for
many years sold and is still selling this product in the Philippines
that defendants have derived unlawful gains and profits from the
aforesaid infringement to the great and irreparable injury, damage
and prejudice of plaintiff, and have deprive plaintiff of legitimate
returns which plaintiff would have otherwise would have falsely and
deseptively concealed that the same contains "Chloramphenicol"
and "Chloramphenicol Palmitate" are entirely different substances;
that defendants, advertising and selling "Venimicetin Suspension",
have falsely and deceptively use plaintiffs name and represented
that defendant No. 1 holds a license from plaintiff for said medicine
with, inter alia, the following words: 1wph1.t
First Compulsory License in the Philippines by
Parke-Davis Company Detroit Michigan, U.S.A.;
that plaintiff has never granted defendant No. 1 any kind of license
for any product; that defendant No. 1 has not even applied for a
compulsory license under plaintiff's Letters Patent No. 279, the
only patent which covers "Chloramphenicol Palmitate"; that the
compulsory licensing case between plaintiff and defendant No. 1 in
the Philippine Patent Office (Inter Partes Case No. 181) dealt with
plaintiff's Letters Patent No. 50 (which covers "Chloramphenicol")
and not with plaintiff's Letters Patent No. 279 (which covers
"Chloramphenicol Palmitate"); that the resolution of the Director of
2 of 5

Patents fixing the terms and conditions of the compulsory license
for "Chloramphenicol" has not yet become final as the same is still
subject to a pending motion for reconsideration; that even if said
resolution does become final, the compulsory license will not cover
defendants' "Venimicetin Suspension" which actually contains
"Chloramphenicol Palmitate" and, therefore, defendants' statement
will still be false and misleading; and that defendants' use of the
aforesaid false statement is designed to induce persons to
purchase and physicians to prescribe the use of "Venimicetin
Suspension" in the mistaken belief that it is Identical with the
"Chloramphenicol Palmitate" product manufactured and sold in the
Philippines by plaintiff's subsidiary or that the active ingredient in
said product has been obtained from plaintiff and/or that said
product has been made under the supervision or control of plaintiff
thereby causing damage or loss to plaintiff. On the basis of the
foregoing allegations, the plaintiff prayed, among others, that
defendants be enjoined from performing the acts complained of as
infringement of patent and unfair competition and to pay the
plaintiff all damages due thereto by reason of said acts.
On May 6, 1966, the Court of First Instance issued an order which,
among others, temporarily restrained the defendants "from directly
or indirectly selling, using, causing to be sold or causing to be used
any 'Chloramphenicol Palmitate' not manufactured by plaintiff or
plaintiff's wholly-owned subsidiary, Parke, Davis & Company, Inc."
Alleging that the defendants have not complied with such order,
the plaintiff filed on May 24, 1966, a motion to punish defendants
for contempt.
Before the court could act on the plaintiff's motion for contempt, the
defendants filed a Motion to Dismiss, dated May 25, 1966, alleging,
among others, that the complaint states no cause of action against
them since defendant No. 1 "was granted a compulsory license to
manufacture, use and sell its own brands of medicinal preparation
containing 'chloramphenicol'."
On June 17, 1966, the plaintiff filed its Opposition to Motion to
Dismiss controverting, among others, defendants' contention that
the complaint states no cause of action. Plaintiff pointed out that
the defendants have confused the substance which is the subject
matter of the complaint, namely, "Chloramphenicol Palmitate", with
the substance covered by the compulsory licensing case, namely,
"Chloramphenicol", and the Letters Patent subject of the complaint,
namely, Letters Patent No. 279, with the Letters Patent subject of
the compulsory licensing case, namely, Letters Patent No. 50.
On June 27, 1966, the defendants filed their Reply to Opposition
alleging, among others, that in advertising and selling their product
"Venimicetin Suspension," never do they state that the same
contains "Chloramphenicol Palmitate" They pointed out that even
in the annexes of plaintiff's complaint (consisting of the packages
and labels allegedly used by the defendants in said product), only
the substance "Chloramphenicol" is stated showing that the
substance involved is Cloramphenicol and not "Chloramphenicol
Palmitate".
On July 5, 1966, the plaintiff filed its Rejoinder to Reply to
Opposition alleging among others, that while the packages and
labels of defendants' "Venimicetin Suspension" indicate that the
same contains "Chloramphenicol", the truth of the matter is that
said product does not contains said substance but the subtance
covered by letters Patents No.279, namely, "Chloramphenicol
Palmitate". This, plaintiff pointed out, is expressly alleged in the
complaint; thus, applying the rule that a motion to dismiss
hypothetically admits the truth of the allegations of the complaint,
defendants are guilty of (1) infringement of patent, by selling,
causing to be sold, using or causing to be used "Chloramphenicol
Palmitate" in their medicine called "Venimicetin Suspension", and
(2) unfair competition, by concealing that said medicine contains
"Chloramphenicol", and, by deceiving and misleading the
purchasers who are trade to believe that "Venimicetin Suspension"
is covered by a compulsory license from the plaintiff.
On the basis of the foregoing pleadings, the Court of First Instance
of Rizal issued the order dated August 22, 1966, which dismissed
the complaint on the ground of lack of cause of action, to
wit: 1wph1.t
3 of 5

xxx xxx xxx
After a careful consideration of the arguments for
and against the motion to dismiss, and in view of the
fact that the substance covered by Letters Patent
No. 50 and Letters Patent No. 279 is the same and
that is, the substance known as "Chloramphenicol",
because while under Letters Patent No. 50, the
substance is referred to as "Chloramphenicol", in
Letters Patent No. 279; THE SUBSTANCE HAS
BEEN DENOMINATED AS Chloramphenicol
Palmitate it is the opinion of the Court that
"Chloramphenicol" and "Chloramphenicol Palmitate
are the same, the difference being merely in the
taste, and this Court to state that there was
infringement of Patent with respect to Letters Patent
No. 279 would be tantamount to preventing the
defendant, Doctors" Pharmaceuticals, Inc., from
exercising the right granted it by Letters Patent No.
50. It would further render nugatory the decision of
the Director of Patents, affirmed by the Supreme
Court, granting the defendant, Doctors'
Pharmaceuticals, Inc., the right to use and import
"Chloramphenicol".
The defendant, V-Lab Drughouse Corporation being
merely a sales representative of the defendant,
Doctors' Pharmaceuticals, Inc., and the Court being
of the opinion that there is no cause of action with
respect to the principal defendant, is likewise of the
opinion that there is no cause of action with respect
to the defendant, V-LAB Drughouse Corporation.
It is likewise the opinion of this Court that there is no
cause of action for unfair competition because a
perusal of the records of this case will show that
under paragraph 7 of the Resolution of the Director
of Patents, Annex "C" of the Motion to Dismiss, the
petitioner (Doctors' Pharmaceuticals, Inc.) shall
adopt and use its owntrademarks or labels on all its
products containing Chloramphenicol under license
from Parke. Davis, & Co., Inc., of Michigan, U.S.A.
The claim of the plaintiff that the representation:
First Compulsory License in the Philippines by
Parke Davis Company, Detroit Michigan, U.S.A.
is false and has a definite tendency to deceive possible purchasers
and distort the facts is not well-taken in view of the above-
mentioned (Par. 7) of the Resolution of the Director of
Patents. 1wph1.t
WHEREFORE, finding the ground of lack of cause
of action to be well-taken, this case is ordered
DISMISSED, without pronouncement as to costs.
The restraining order heretofore issued is hereby
lifted and set aside. Having reached the above
conclusion, the Court will no longer pass upon the
issue of contempt.
SO ORDERED.
Hence, the present appeal.
We are thus tasked with the resolution of the issue of whether or
not the lower court correctly dismissed the complaint for damages
for infringement of patent and unfair competition on the ground of
failure to state a cause of action.
It is axiomatic that in resolving a motion to dismiss a complaint on
the ground of failure to state a cause of action, the court should
hypothetically assume the truth of the factual allegations of the
complaint (except allegations of facts the falsity of which the court
may take judicial notice of) and determine whether on the basis
thereof, the complainant is entitled to the relief demanded. Had the
lower court applied the foregoing formula, it would not have
4 of 5

Dismissed, on the ground of failure to state a cause of action, the
complaint for damages for infringement of patent and unfair
competition. For, instead of hypothetically assuming the truth of the
factual allegations of the complaint, the lower court had ruled
against their veracity and consequently concluded that the
complaint states no cause of action.
As can be gleaned from the appealed order, the pertinent portions
of which We have heretofore quoted, the lower court premised its
ruling that there is no cause of action for infringement of patent on
the assumption that "Chloramphenicol" (the substance covered by
Letters Patent No. 50) and "Chloramphenicol Palmitate" (the
substance covered by Letters Patent No. 279) are the same. Thus,
instead of hypothetically assuming the truth of the plaintiff's
allegation that "Chloramphenicol" and "Chloramphenicol Palmitate
are two different substances, the lower court had ruled against its
veracity. This is clearly an error considering that the said assumed
fact cannot qualify as something which the court could take judicial
notice of nor was it competent to so find in the absence of
evidence formally presented to that effect. The existence of two
patents separately covering said substances simply militates
against said factual assumption and requires the presentation of
evidence sufficient to convince the court that said substances are
indeed the same.
Had the lower court hypothetically assumed as true, for the
purpose of the motion to dismiss, the allegations in the complaint
that "Chloramphenicol" and "Chloramphenicol Palmitate" are
entirely different substances and that "Venimicetin Suspension"
actually contains "Chloramphenicol Palmitate" and not
"Chloramphenicol" as indicated in its package and label, it
necessarily would have to conclude that the complaint states
causes of action for infringement of patent and for unfair
competition. For defendants would then be guilty of infringement of
patent by selling, causing to be sold, using and causing to be used
"Chloramphenicol Palmitate", without the consent or authority of
the plaintiff as the holder of Letters Patent No. 279, Claim 4 of
which allegedly covers said substance. Sections 37 and 42 of R.A.
No. 165 provide:1wph1.t
SEC. 37. RIGHTS OF PATENTEES. A patentee
shall have the exclusive right to make, use and sell
the patented machine, article or product, and to use
the patented process for the purpose of industry or
commerce, throughout the territory of the Philippines
for the term of the patent; and such making, using,
or selling by any person without the authorization of
the patentee, constitutes infringement of the
patent. (Emphasis supplied.)
SEC. 42. CIVIL ACTION FOR INFRINGEMENT .
Any patentee, or anyone possessing any right, title
or interest in and to the patented invention, whose
rights have been infringed, may bring a civil action
before the proper Court of First Instance, to recover
from the infringed, damages sustained by reason of
the infringement and to secure an injunction for the
protection of his rights.
Likewise, the defendants would be guilty of unfair competition by
falsely stating that defendant No. l's medicine called "Venimicetin
Suspension" contains "Chloramphenicol" when in fact it actually
contains "Chloramphenicol Palmitate", and that it is covered by a
compulsory license from the plaintiff. Section 29 of R.A. No. 166
provides,inter alia;1wph1.t
In particular, and without in any way limiting the
scope of unfair competition, the following shall be
deemed guilty of unfair competition:
xxx xxx xxx
(c) Any person who shall make any false statement
in the course of trade ... .
Clearly, the lower court erred in dismissing, on the ground of failure
to state a cause of action, the complaint for damages for
infringement of patent and unfair competition.
5 of 5

WHEREFORE, the appealed order of dismissal is hereby set aside
and the complaint for damages for infringement of patent and
unfair competition is hereby reinstated. Without pronouncement as
costs.
Barredo (Chairman), Aquino, Guerrero * and De Castro, JJ.,
concur.1wph1.t